Government plans to table the amendment bill in monsoon session of Parliament
The government may hike foreign direct investment (FDI) limit in the pension sector to 74 per cent and a Bill in this regard is expected to come in the next session of Parliament, according to sources.
Parliament had last month approved a Bill to increase the FDI limit in the insurance sector from 49 per cent to 74 per cent. The Insurance Act, 1938 was last amended in 2015 which had raised the FDI limit to 49 per cent, resulting in foreign capital inflow of Rs 26,000 crore in the last five years.
The amendment to the Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013, seeking to raise the FDI limit in the pension sector, may be tabled in the monsoon session or winter session, depending on various approvals, sources say. The cap for foreign investment in pension fund stands at 49 per cent. The amendment Bill may also propose to separate the NPS Trust from the PFRDA.
The powers, functions and duties of the NPS Trust, which are laid down under the PFRDA (National Pension System Trust) Regulations 2015, may come under a charitable trust or the Companies Act, according to the sources.
The intent behind this is to keep the NPS Trust separate from the pension regulator and managed competent board of 15 members. Most of these members are likely to be from the government as they, including states, are the biggest contributors to the corpus.
The PFRDA was established for promoting and ensuring the orderly growth of the pension sector with sufficient powers over pension funds, the central record-keeping agency and other intermediaries. It also safeguards the interest of the members.
The National Pension System (NPS) was introduced by the Government of India to replace the defined benefit pension system. NPS was made mandatory for all new recruits to the central government service from January 1, 2004, (except the armed forces in the first stage) and has also been rolled out for all citizens with effect from May 1, 2009, on voluntary basis.
The government had made a conscious move to shift from the defined benefit, pay-as-you-go pension scheme to defined contribution pension scheme, NPS, due to rising and unsustainable pension bill. The transition aimed at freeing the limited resources of the government for more productive and socio-economic sectoral development.